My First Co-Living Real Estate Deal - Learn From My Mistakes

My First Real Estate Deal Changed Everything… But Not for the Reasons You Think.

Everyone loves hearing about successful real estate deals.

Very few people are willing to share the mistakes.

In this video, I walk you through my very first real estate investment—what I got right, what I got completely wrong, and the lessons that have shaped every co-living property I've purchased since.

If you're buying your first investment property, thinking about converting a home into a co-living property, or simply want to avoid expensive rookie mistakes, this video will save you time, money, and frustration.

I cover everything from underwriting and financing to renovations, contractors, occupancy, operations, hospitality, and the mindset required to build a profitable co-living business.

These are real lessons learned from experience—not theory.

🎯 In This Video You'll Learn

✅ How I found and purchased my first investment property

✅ The biggest mistakes I made (and what I'd do differently today)

✅ How I underestimated renovation costs

✅ Financing lessons every new investor should know

✅ Why underwriting matters more than excitement

✅ Contractor and renovation pitfalls to avoid

✅ How I converted a traditional rental into a profitable co-living property

✅ The operational lessons that most investors never talk about

✅ Why hospitality became my competitive advantage

✅ How these lessons shaped the CoLivingiQ system

🚀 Ready to Build Your Own Co-Living Business?

If you're serious about buying your first co-living property—or improving one you already own—schedule a CoLiving Business Assessment.

🌐 www.colivingiq.com

We'll help you:

Analyze deals before you buy
Build an acquisition strategy
Understand financing options
Plan renovations
Increase occupancy
Improve cash flow
Build systems that scale
📚 Chapters

00:00 – Introduction: My First Real Estate Deal
00:35 – My Background Before Real Estate
01:20 – Buying My First Investment Property
02:40 – Why Leverage Can Accelerate Growth
03:45 – Learning to Underwrite Deals
04:55 – Researching Successful Co-Living Operators
06:10 – The Business Model That Changed My Thinking
07:25 – Choosing the Right Property Layout
09:55 – Planning the Interior Conversion
11:20 – HVAC, Mechanical & Construction Lessons
12:35 – Renovation Mistakes That Cost Money
13:40 – Budget Overruns & Unexpected Expenses
16:00 – Walking the Property Before Launch
17:05 – My First Resident Experience
19:30 – Furnishing & Preparing the Property
20:45 – Learning Through Trial and Error
23:30 – Appliances, Materials & Vendor Decisions
25:00 – Resident Screening & Operations
26:10 – Virtual Staging & Marketing
28:55 – Financing & Seasoning Challenges
30:10 – Property Management & Background Screening
32:55 – Expensive Construction Lessons
35:30 – Tenant Turnover & Cash Flow Reality
37:55 – Contractor Pricing & Cost-Plus Models
40:30 – Scaling Beyond One Property
42:00 – Hospitality vs. Being a Landlord
45:40 – Building CoLivingiQ
48:20 – Why Standards Matter
50:45 – Creating Long-Term Value
54:40 – The Biggest Lesson I Learned
56:10 – How I Analyze Deals Today
59:55 – Appraisals, Equity & Buying Right
1:02:20 – Negotiating Better Deals
1:05:55 – Building a Sustainable Business
1:07:15 – Final Advice for New Investors

🔔 Subscribe for Weekly Co-Living Education

Every week on CoLivingiQ we cover:

🏠 Co-Living Investing

📊 Deal Analysis

💰 Financing Strategies

📈 Cash Flow Optimization

🏡 Property Acquisition

🤝 Hospitality Systems

📋 Operations & KPIs

🚀 Portfolio Growth

Transcript

SPEAKER_00 0:04

Here we go. Today's conversation is around my very first real estate deal. People have asked me to tell them the story. Here it is. I joined Pad Split in 2021, and I came from an entrepreneurial background. So prior to this, I had owned my own distribution company. I was a Boer's head distributor. I my kids grew up thinking daddy sold baloney for a living. I wanted to share this story because it's something that a lot of people don't ever want to talk about. They they talk about I own 50 doors or I own 100 doors, and they talk about it from a lens of 10 years of experience. I want to go back to the very beginning to feel my pains and to share them. And my lessons are no different than every single newbie investor's lessons that there are. But if you kind of learn and listen, you can avoid a lot of these problems and mistakes that a lot of new people make. It depends on the rooms that you're in, the mentors that you have, the people that you work with in the community that you play in. These are lessons that I give to you after being involved five or six years as a real estate investor. Let's dive in. My very first property I came across was in Forest Park, Georgia. I bought it from a wholesaler and I bought it for the purchase price of $183,000. I knew the math. So, and I kind of cheated. You guys got to remember like I worked at Pad Split and it was the largest digital co-living marketplace in the country. So I had the opportunity as being an insider of working with a ton of different hosts that had all sorts of different backgrounds as real estate investors and operators. So I felt like I had a cheat code. But the thing that I always came to real estate investing with was a background in being an entrepreneur. So I was very keen on learning the operating business. To me, if you don't understand how money is made, you sure as hell better not spend money. Right? You better spend and allocate the resources and money that you're going to spend with an idea on how money is going to be made in the business that you're eventually going to own and operate. So that was the lens that I came from. When I came to this, I realized that one of the first things that I had to realize and understand well was the financing model. So I spent a ton of time in the beginning asking people how they finance their deals. Lo and behold, there's like a hundred different ways that new investors can finance their deals. Simple ones that we talk about. Cash. Cash is king, gives you a lot of leverage, but it's your cash. Second part is hard money. So I didn't really know what that meant. So I had to go and go to YouTube University and join these groups and talk to my mentors and understand what hard money was. Essentially, I'm borrowing money from somebody else. They give me a dirty rate: 10, 11, 12, even 13% with two to three to four points, depending on how new you were. They give you the hard money. It's as if buying the property with cash, but the clock is ticking and the meter's running on the interest that you get for hard money. And with all things, you can negotiate the terms of your hard money loan. That was the second way that you can do it. The third way that you can do it is you can get a private money lender. Very similar concept, but it's not through some kind of institution. You're just getting a capital partner. That was another way. So I had the opportunity, I had a capital partner, and we went out and I had, you know, deep-seated information around how I think I should acquire a property. Reached out, a little, I looked for properties for five months, I think. And I had an underwriting tool. But one of the things that was always on the backside of my head was, what is the business that I'm going to run? So I knew that at that time Pad Split had just changed their fee structure. So this was the end of 22, going into 23. I purchased the property at the end of 22, and I bought it from a wholesaler. He gave me a list price of like 195. I knew that wholesalers had a good amount of margin in there. I negotiated that price down to 183. All cash. I closed on the deal, took the property on. And then I started the process of converting this property. And like every newbie, you know, I went out and I asked the questions. Who's the best general contractor I can work with? And I found and identified the one that had done a hundred renovations for Pad Splits. So they had built and converted single-family properties into co-living properties, and their track record was a big number. What I didn't understand, so mistake number one. What I didn't understand was even if you had renovated a hundred of these properties, how were they renovating? What was the mindset in which they were renovating these properties? Little did I know that this general contractor, he had all of these notches in his belt because he was working with a large hedge fund. The large hedge fund had their own business criteria, which was essentially $25,000 per door finished product. So do the math. 10 bedrooms at $25,000 a door, that was essentially $250,000 for the entire deal. Buy the property, renovate the property, furnish the property, get it live for $25,000 a door. Little did I know at that point in time that I just thought conversion was conversion. But the way that he wanted to convert the property was under the guise and the knowledge that he had of how his previous customers had modified these properties and converted them to co-living. So I brought him down to the property once I got keys and we walked the property. Actually did it before I closed. And he gave me an estimate. That business I wanted to run was more around the business model that was being, you know, proposed because of the fee structure. When PadSplit changed their fee structure from 12% flat, every single dollar collected, they took 88, um, we took home 88 cents, they took home their 12 cents. When they moved to the 10-day fee structure and 8% on the 11th day, what that meant for me was it was no longer an occupancy business. It was a tenure business, meaning that I had to have my tenants and members and customers stay a long enough time so I can recoup the cost that I was paying for new customers coming in, the booking fee per se. Listen, you can have your feelings about the booking fee. People lose their shit about the booking fee. It's the cost of doing business. It is just is what it is, right? If you factor it into your business model, it's a so it works. Okay. It's kind of like sandpaper. It's chafes, but it works. So I had to think about it as I'm giving feedback to the general contractor who's telling me this property, and it was a big property. It was like 3,600 square feet, two floors, and um, it was a finished basement and it had three bathrooms, one master bath in there. So as we're walking through the property, he's telling me where all these walls he's gonna put in. And he essentially came out with an 11-bedroom three-bath house. Talking about I got to put a hallway down the middle of the master bathroom so that we can make it a shared bathroom. And I took a minute and thought back and I went back to him. I was like, that's not the product that I want to deliver. That's not the business that I want to run. So we ultimately settled on a seven-bedroom, three-bath house. So we have a full kitchen, a regular sitting dining dining area that leads out into an outdoor patio that's covered, and a full living room. I left the full living room. Downstairs, we captured one, two, three bedrooms downstairs because it was an open floor plan basement. And those three bedrooms, they feed into the one bathroom downstairs. Upstairs, we have a master that was the original master, and then one, two, three bedrooms that feed into the hallway bathroom. I had a good sense of the kind of business that I wanted to run. Here's where the lessons to be learned. Great. I hired on, he gave me the statement of work. I signed the statement of work. It was somewhere around $80,000. Fast forward to the end of the story, it ended up costing like $110,000 at the end because there were so many things that just kept coming up that ignorance on my part, but not understanding the conversion and the renovation and the construction process, my assumption was this is my general contractor. He's on my team and he's going to handle all these things, and he knew what he was doing. So I kind of sat back and let him do his thing. The permits, it took 110 days to get permits, and I needed to get plumbing permits because it was an old house. They had cast iron plumbing in there. I had an electrical panel I had to redo because it was an old house and it was 110 voltage. I had to upgrade it to 220. And then I had the walls and the everything else inside the house to deal with the kitchen renovation, all of these things, laying the LVP floors, all of these things. What I didn't take into account were the things that would come back and bite me in the ass because I didn't fully understand what the property needed to have on the inside to support the business that I wanted to run. I'll start with the simple ones: hot water heater and the HVAC or heating and air conditioning and the AC unit. I didn't understand what tonnage meant. I didn't understand the size of the air handler. I didn't understand the physical engineering of, you know, how returns and supplies work. So in your personal house, a return is the thing that sucks air out of the room and sends it back to the air handler so that it goes over the coils, it gets cold, and then it gets pushed out. And they call those the supplies. The vents where you feel the air coming in to the rooms are called supply. Here's a just a quick um nugget on how HVAC works in a room. In most houses, you'll have large returns in big areas like living rooms, outside of kitchens or hallways, and they're trying to suck the air out that's stagnant in the room to send it back into the system, get cooled, and then push it back out. In a co-living property, you have to remember airflow that works inside of a house doesn't work the same way. Because our bedroom doors, which are now, you know, some converted common space areas, those doors never open. Our bedroom doors always stay locked. So there is no natural airflow that happens in a house. Well, your HVAC system isn't designed to handle that. The best way that my guy told me to explain it is if I'm sitting in a bedroom and all I have is a supply, think of it like a shower head. So here comes the cold air. Like I live in Atlanta, it's 100 degrees outside. Here comes the cold air out of this little spigot, right? It's like a shower head. The rest of the room doesn't really get impacted by it, right? You can blow in as much cold air as you want, but if the rest of the air that's sitting in there is just hot and not getting sucked back out, the room doesn't cool down like it should. Keep that in mind because as you're putting up these walls in these common areas, there's no air circulation. Quick hack. If you really wanted to do it, you can shave an inch off the bottom of the door. The vents and returns are typically on floor level. They're going to create some kind of airflow out of your rooms. But also that's a downside, right? Because it reduces the privacy. Whatever smells in the room, whatever the airflow is, whatever the noise is, like it's just an inch shaved off the bottom of the door. Subsequently, and future houses that I've done been really, really sensitive to the supply and the returns in the bedrooms that are there. So just keep that in mind as you're going through the process. But these are the lessons that I had to learn the hard way. And as I like to say these days, once you see something, you can't unsee it. So this is the education that I went through to become a co-living investor, not just a real estate investor. So let's go back to the original acquisition. I bought this 3,600 um square foot house. And then the unique thing about this was that in this neighborhood, it was a unicorn. Every other house in the neighborhood is like 2,200 square feet. So here I am, I bought this big ass house. And on my spreadsheet, if I did it by square footage, the price per square footage. So I bought it at like $50 some odd dollars a square foot. And then the average refinancing or the appraisals, quote unquote, ARV or after renovated value or after repair value, whatever you guys want to call it, that's what the bank was going to appraise the house at. Okay, I'll get back to that story because that's a fun one, too. So I go through the renovations originally, $183 plus the $80,000 renovation that puts me at like $260. This property should have had somewhere between $300 and $370,000 based upon the square footage compared for the comps and the comparable houses at that finish level. I should have been okay. I shouldn't have had a lot of money. I'm terrible at math, so I'm just going to do this on this recording so that you can see what I'm saying. So if it's $300,000 and let's say $30,000 as the appraised value, and I wanted to get a loan for 75% of that, it would have been $247, $247.5. So I'm going to take out the $183 that I paid for it at $64,000 minus the $80,000 reno. That leaves me with like $1,500 all in. Okay. I'm going to go ahead and tell you that I had to add in pretty much $30,000 more to get the project done. At the end of the day, that leaves me about roughly $40,000, $45,000 left in the deal, which is okay in terms of like real terms, right? If I said of the $330,000 property, you know, what percentage is that? It's like 13%, $13.5%, 13.78%. That's better than the 20% down. I got a ton of write-offs because of the renovation. I got to depreciate it. I have um appreciate our equity in the house because I bought it below what I thought I should, but I really got kicked in the can on the renovation. So one of the biggest lessons that I think most new investors get, you get screwed in two parts. One is the acquisition. You buy the property incorrectly for too much relative to what the market rate is. And the other part is you got to learn the conversion. And this is the tough part that's tough. Who's going to teach you and hold your hand through the conversion process so that you can hold your general contractor accountable for the things that he's going to do? Because he's going to do work and he's going to send you an invoice and you're going to pay that bad boy. So here's the thing about this learning. If you don't have some semblance of what to expect during the renovation, then how do you hold the general contractor accountable? I didn't know what the code was in these rooms. I didn't know when I went back to walk the house. I walked the house all the time because I was, you know, I'm ADD, OCD, I'm compulsive about everything. And I was like, oh, I'm going to be in this guy's butt and I'm going to be going ahead and you know, inspecting upon him. And I kept going to visit the house. And I was, what was I looking for? Hey, the walls are up. That's great. Hey, you have a drop ceiling going over there. Where's the vent for that? Okay, there's the vent. Great. I had no idea how to test for the airflow. I had no idea. So the downstairs, this is a big one that later came back to bite me. The downstairs floor, three bedrooms fed into one hallway, full bathroom. The full bathroom led into an ejector pump. So if your property is below grade, all that water and sewage, welcome to gravity. Gravity does not let water go up. So it has to pump into this big tank. And then is an ejector pump that pumps it straight up into the main and out it goes into the house. I wished I had more knowledge because as soon as this property went live, one month into it, I get a phone call from the first, you know, from the first couple tenants downstairs. Yo, there's a massive flood downstairs. There's poopy water flowing out everywhere. Go and find out that he didn't follow code in how the piping from the ejector pump was going out to the main. My assumption was that he was going to handle that. He was my GC. He was on my team. No, now, here's the number one lesson that I took away from every single project that I've ever had. There's only one person on your team. This guy, right? And you have to protect yourself from everybody because you're the one from acquisition, negotiation, acquisition of the property through the conversion of the property until you go live. You're the only one looking out for your own best interests. All of these other people that you're going to write checks to, treat them like vendors. You're paying them for a service or an item and they're delivering it to you. Makes sense, right? That's how you would treat the electric company. You don't really have a choice. They tell you how much to pay. You don't have a choice with like the furniture guys. You're going to pay for beds and nightstands and the list of things. Put a caveat in that. I'm going to come back to that. So all of these people that you're writing checks to. Hello, realtor, here's your 3%. Hello, general contractor, here's your statement of work and your invoices. You know, hello, furniture guy, here's your statement of work and invoices. Here comes a mortgage company, here comes a utility company, here comes everybody with their handout. And me as an investor, I'm writing checks. So my learning from having a business background previously and being an entrepreneur was everybody was a vendor. Same thing goes for the platform that I ended up going with, which at that time was my employer, right? So I got the property, finished the renovation, got kicked in the can, uh, and took my lumps in terms of not knowing um how to hold the general contractor accountable. You know, and then to be able to argue, unfortunately, with the general contractor, say, that's not my vision for how I wanted my house to be laid out. It cost us time and money. So here we go. I get that. Um, the walls are up now. Here comes the furniture fiasco. So, like everybody else, I wanted the simplest, most economical way. So I downloaded the furniture list. It was an Amazon purchase list. I'm like, all right, this is great. Let me just go ahead. If everybody else is doing this, why don't I just do this? My God, the amount of boxes and crap that came to my house in order for me to put together the dresser, the bed, the mattresses. And they're not, they're not light, by the way. So unless you've been working out, it's hard to carry those bad boys, seven of them across the entire house. Then I had to deal with um all the hex bolts and nuts and everything else. And I thought to myself, oh my God, this is gonna be so easy. I'm just gonna go ahead and put these things together in a couple hours. All right, four days later, I was still putting furniture together, and I had extra nuts and extra pieces and extra bolts everywhere. It was the worst thing. So you quickly get caught in this like tunnel vision view of what do I need to get done to get this house live? And it's the simple thing on the spreadsheet, and I did it like a Gantt chart. I don't know if you guys use Excel spreadsheets or not, but I'm like, these are the tasks that I need to get done. Furniture assembly, one day that that didn't go out so much. So, like, one of the things that that you start learning as you start playing as a real estate investor, your value of time gets completely changed. Not only because time affects financing, timing affects like interest, timing affects everything else in terms of days not collecting revenue and days that you are losing what you could be doing somewhere else in your life. Just remember the one thing in the world that does not change, the clock does not stop for anybody. So you have to go into this with an understanding of time and money and the relationship between the two. Okay, so let's get through the renovation piece. Got the house renovated to the way I want to. It is always gonna work come out worse off than you think when you're walking through. Hey, these cabinets, they're okay, right? We can keep them. Oh, yeah, don't worry about it. We'll just put a coat of paint on those. Yeah. You better be aware of what that means. Okay. The um you the appliances in the house. So this house had a washer, dryer. I've subsequently had to repair. Place out the washer. Um, it came with the dishwasher. I knew there's an entire, you know, argument about whether you keep dishwashers in there or whether you keep um garbage disposal in it. I decided to keep them both because I have lived in an apartment that didn't have one and I lived in a house that had one. In my mind, this I do give myself credit for. I had a really good idea of what experience that I wanted to deliver. I wanted the members to come in. I wanted to build a community in the house, like in all of my research around co-living and shared housing. And a lot of it was predicated on best practices of best operators that I had known on Pad Split and what they were doing really well. But also I expanded my search to look at who in the world is doing co-living. And it exposed me to a ton of what was going on in Europe. Why were people selecting to go into a co-living property? And how was that being, you know, how were they finding success in that? And one of the things that always jumped out is how they marketed their properties, what made them stand out from any other room, right? And I'm a huge marketer. Like I love the idea of marketing. Without marketing, nobody knows you exist. And then how do you sell something on the differentiation if you're essentially selling the same product all over the place? Right. Hello, Apple. Same exact thing, right? Like the Apple's a phone. It's a small mini computer, but there's a Samsung, there's an LG, there's Motorola. Like, what's the brand differentiation? So that was always in the back of my mind is like, how do I build a brand that I can lay over all of these properties that I wanted to get into and as I continue to build out my portfolio? Not a lot of people think like that. It just so happened to be that the way I was wired. Okay. So, and I still have a lot of conviction on community equals less friction, less problems, less bad members, less time that I need to manage the people that are there, and the ease of marketing. How do I market the experience that you can expect? Because everybody can see the pictures. I'm going all over the place here, but I just want you to understand like how you market your property because I worked at Patswood, I knew there were 20 tiles on the find a room page, and they all look the same. Right. And then I'll get into how I market my properties a little bit differently. But like, let's go through some of the lessons that I learned here. The furniture. Amazon furniture sucks. It is low rent. And in I made like conscious decisions to pay a little bit more for 10-inch mattresses instead of the cheapest that were eight inches. I made the decision to allow and provide bedding in exchange for the move-in fee. So I used the move-in fee as a vetting tool. If you can't afford $100 to move into your house, you're probably that's a signal that you're going to have some economic difficulties. Or you're at the bottom of your rope and you're borrowing money to get in. And once they moved these members and customers moved into my property, here's what I knew: they became my problem. Because as an employee, I knew there was nobody from the platform who was going to show up at my house on Thursday at midnight and ask John Doe to move out. That was on me. And I am not a bouncer. I am not, you know, a repo man. I don't want to deal with that. Right. So it goes back to the idea of I wanted to choose my customers intentionally so that I can run my business intentionally. Great. So with that being said, the furniture came in. I took really good photos. I happened to use AI to enhance the lighting because I didn't want to pay $350 for a photographer, but I knew that if I took the right angle photos, I can go ahead and uh do enhancements on the lighting. I didn't do any craziness around, like, hey, virtually staged this thing. Because I knew as a marketer that whatever photo they had better match what happens when they open the door. I say it all the time, and I'll reiterate it here. Expectations and reality. This space is where resentment lies. And as somebody who's a service provider, if you have resentment to the person that you're supposed to pay money to, that is not a good start to a relationship between a landlord and a customer or a seller and a buyer. It just doesn't work. So I wanted to provide a little bit better experience. I wanted to be able to charge a little bit more than the average market rate rent. And I thought I was being challenged and I was being told all over the place by people internal to the platform and people external that were hosts, I'm charging too much. All right. All that being said, this property, once it was finished and ready to go, it was like September, and we're getting into the slow months. Pad Split at the time was working on this like contract um program with something that the city was working through a nonprofit, which was they were getting everybody out of tents that were underneath all the overpasses. And they had all this funding that they were going to route toward finding alternative housing. And in my mind, I talked to myself and my partner. I'm like, hey, do we want what they are telling us is guaranteed money, or do we want to just go live on the platform and go after running the business? We said we'd give it 30 days. So 30 days later, my house was picked to be um in this program. And they took the city, the nonprofit, they took forever on the organization on their backside. So I was supposed to get new tenants to come in, and they were like, oh, we have a different house over here we're gonna fill. Thank God that somebody's ineptitude as an administrative group, it saved me tens of thousands of dollars because the program that they ran eventually got defunded. The people that were putting into the houses had all sorts of like mental illness. They had all sorts of like, you know, previous convictions, like they just weren't the right people, right? We're trying to solve for for occupancy at the time. So we thought these partnerships would work. And thank God I avoided that train wreck. So wasted a month, zero income coming in. Thank goodness I had not refinanced the house yet at this point because I needed to wait a certain seasoning period because I hadn't learned that as well. Like a seasoning period is if I use my own money and I wanted to delay refinance back out from a bank. So I put up our own cash for the purchase of the property and the renovation and the was it 283 essentially, 183 plus 100. And it's and I was going to the bank and say, give me a loan for the appraised value. Hadn't happened yet. So I'll tell you that story in a second. So I wasn't paying interest because I owned the property outright. Thank God. But it was still, this is the question is how do you value time? The opportunity cost, this $280,000, it could have been in the market getting 10% return, but it wasn't, right? It was in this property. So that was kind of the things that you weigh out in terms of time and value for dollars. All right, what ended up happening? I put it right onto the regular platform, and in comes the first person. First person comes in, gentlemen. Oh, I'm a man of God. I don't worry about it. I'm a good human being. My assumption was that the platform would handle all the background screening in the income verification. So I read it, I understood what it was going to be. This guy had a job, he was working for a concrete company. I got screwed in that deal because he stayed for like three months and ended up leaving with like a $1,200 balance because, oh, I'm I'm slow, it's the wintertime, there's not a lot of concrete jobs, just work with me, and I'm sitting here trying to be empathetic. And I'm like, oh, this is a man of God. He's da-da-da-da-da. First of all, if anybody says that, that's a red flag for me. Just do what you say you're gonna do and say what you're gonna do and do it, right? So in this case, I had to develop processes on the fly. What do I do with a balance? How long before um I give a notice to vacate for somebody who has a balance? None of this stuff is part of the platform. They can say, hey, at $300, the automated message goes out to that member and says you're automatically terminated. Guess whose house you're still living in? This guy. So these are the things you learn on the fly because I was not asking enough questions around how do I handle this? What do I do with this? What happens in this scenario? How do I avoid these mistakes? That's the whole reason why this thing started developing. That's why I ultimately, five years later, realized the gap between hey, investor, newbie, go find a single family rental, put some walls up, put some furniture in, and you're good to go. No, the whole business is not about putting up walls, the whole business is about collecting income and revenue from multiple tenants in a house. A lot of things to consider. Okay, let's get back to this. Other lessons that I learned. The furniture goes in. Okay, the first bedroom that will fill in any property will typically be the one that has a master bathroom in it. Why do you think I am so bullish on paying the money and investing for additional bathrooms in my new houses? So any new properties I buy, I have to keep in the back of my mind how easy is it to add bathrooms? Meaning if it's a second-floor room with a basement, they have access to the plumbing underneath the floor. So they can drop in plumbing upstairs, for instance, in a large living room. If I want to put a private bath and make it one large room with a walk-in closet and a bathroom, it's really easy because they can access the plumbing underneath the floor. This is what happens when gravity continues to do what gravity does, right? So learnings, this is how you get better at the game. Nobody told me this, right? Nobody told me these things until afterwards, and you had to pay quote unquote the tuition through your first projects to kind of learn these lessons. Granted. All right. So first man goes in, takes the master bathroom. He's a slob. So now I immediately have to deal with dishes in the sink. Next woman comes in. She was living in a single um shared bathroom room. This gentleman ends up leaving, and she wanted to move into the master bathroom. So she she moved into um the master room. At the same time, she had co-workers. So we came right around into Thanksgiving. And at that point, I think we had three people in the house. So a month into it, September, October, November, going into the end of November, I had four people in the house at that point. I made a decision. I like the people in my house. I had sold them on the idea that we are a community in the house. I run house meetings in person every single month. I was going to do anything that I could to prove out that, hey, my belief and conviction that you can mix hospitality with a shared living experience and deliver something very similar to a European model where the people in the house shouldn't just be room two, room three, room four. They should actually know each other because they're going to be living together. So whatever I could do to promote community in the house, I sought out to do. So Thanksgiving Day comes and I made the offer. I will buy all the ingredients if y'all want to cook Thanksgiving Day dinner together. So the woman that moved into the master bathroom after the guy left, she's like the house mom. She's been there since the beginning. October, early October of 2024. She's been there. And she's essentially been the anchor of that house. She had two other ladies that worked with her at her job. They ended up moving in. Um, ultimately, her daughter ended up taking a room in the house. That house has been uh steady eddy filled for essentially the whole time. I went through like a four-month period, five-month period where one or two of the rooms the people moved out. Um, but essentially they moved out on good terms, right? They didn't leave with a balance, they ended up leaving out, um, and somebody in the house replaced them with a referral, which I think personally is the secret hack. If you can get internal referrals from somebody who's already living in the house and they're having such a good time, and their experience justifies the value that they're paying for the experience that they're returning, they will talk about that experience with either coworkers, friends, or family. And that's how you fill the house without having to pay the 10-day booking fee. Imagine, let's just do simple math if you've never done co-living on PadSplit. 10-day booking fee means that you take your seven-day rate. I'll make the math simple, 210 days, $210 a week divide by seven, it's $30 a day. So for the next 10 first 10 days of somebody's living there, Pad Split takes the whole 10 days. That's their booking fee. So that means that anytime somebody new moves in that the platform created or brought to you, I don't see a dollar till day 11. And on day 11, I get 92 cents on the dollar, but I don't really because I got to pay that mortgage, I got to pay the insurance, I got to pay all the utilities, I got to pay all the cleaning supplies, I got to pay everything. So for me, it is how do I reduce the one thing I can control, which is promote a environment where it's so good that the members want to refer their friends into it. And I give them, I give them a finder's fee. I'd rather pay them $150 than pay Pad Split uh $300. It's a 50% savings for me. The member gets their money, the new person comes into a house that they like, they know each other, there's no friction. Um, and it's just a much simpler operational business for me. So I decided to self-manage the first property because I wanted to learn all the ins and outs of the business. And this is the evolution of it. Unlike other passive investors who said, hey, my property's live, y'all, platform, go do your thing and send me the check at the end of the month. I looked at it and said, the platform doesn't actually impact my customer's experience. This guy does. And this is the learning for anybody who's a co-living operator. You can outsource all of that operational headache to a third-party person. They're going to take the lion's share of the money. It just, they just are. Whether they tell you it's 12% of the gross revenue and they're going to take a, you know, they call it a cost plus model from normal property managers. If the lawn costs $100 to mow, they'll put on a 20% premium. So then you're going to get charged $120 because they are handling all of these things. I didn't want to do that. I wanted to know everything about the business. So the first property for me was a peach tree dish. Right? That's what I told my members, and that's why I told everybody else is I'm here to test all sorts of different things. And like this is kind of things that you learn. I'll give you an example. Right. So this thing here is a door lock. So most of the ladies in my house, they're they're typically women in my house, just the nature of it, right? This bolts onto the frame. And if you're on the inside of the door, this you pull this around so the door cannot get opened from the outside. Why did I put these things in? Because I saw them in the hotel rooms, and I realized that, oh wow, there's some people where that sense of security, that sense of I feel safe. That was like the number one feedback I got from my customers. What are you looking for in this house? Right? Tell me what your expectations are. And a lot of them, look, they told me their story. Like I'm grinding my ass off at work. I work, you know, 60 hours a week to try to just stay afloat. I'm you, I'm here, not because I want to live with six other strangers, but because financially it's better than paying $1,500, including utilities. So $1,200 for an apartment, $300 for utilities. They could either pay $1,500 or they can pay me $800. That was the trade-off. Can I provide enough value out of the $800 that they want to stay for a year? Because that's how I make money, is if these members pay and they continue to stay for a period of time, this guy profits. That's the math of co-living. I don't care if people tell you, hey, you know, you get eight different rooms paying you only if they're full, one. Only if they pay two. So that's our business. Do they come in, do they pay, and do they stay? If you wanted to kind of boil down what co-living is, that's it. You, as the operator, have to do everything around around that to make sure that they have a good enough experience where they continue to stay, they continue to pay, and then if you're lucky, they tell their friends about how good the experience is so you can fill vacant rooms. All of this, nobody tells you when you first get into co-living because it's hard to describe something you've never done. The great majority of people that work at the companies that I've worked at, they do not own their own product. That was one of the biggest reasons why I hurried out. I wanted to become a real estate investor. I knew so much more about co-living than I thought the average person knew. So I felt like I have a distinct advantage over the rest of the field because this is brand new, right? I felt like an Airbnb investor that got into it in 2018. I'm like, oh, look, man, nobody knows how to do this. I give you a little quick side story. My son, I grew up playing soccer and I loved playing soccer. My wife is all of five feet tall. I'm maybe 5'10 in change. Well, 5'10 and like three-quarters, if you ask somebody. But my son was a tiny little kid growing up, and I had him out there on the soccer field, and he's a July birthday, end of July. So I don't know if you guys are in the South or not, but like he had friends that were born in September and October of the previous year. So at five and six years old, these kids were like a whole head taller than he was. So they're running around the field playing soccer, and I'm going bananas because the boy he couldn't catch up to go play. So I wanted him to learn how to compete. So thankfully, somehow, some way, he ended up getting into ice hockey. And what I loved about ice hockey in this lesson in this story is nobody knows how to skate at six years old. So it was a level playing ground. And the thing that my kid has, which is amazing, it's part natural, part trained, or whatever, but he has grit, right? So he just stayed with it, stayed with it, stayed with it. And if there's one thing that he can do really well on the ice is skate. He has great edges, and therefore, because he can skate, he gets leverage, he gets speed, and he has the ability to compete with people that are 6'4, 6'5. And he's at Arizona State now. He's playing for their club team, which is amazing. But I get to watch him play against Air Force, and these guys are like Captain America, 6'5 on skate, 6'7. And he's blowing dudes up, which makes me so happy on the inside. But the beauty of it is it's an even playing field. You just had to outwork people. And that's what I loved about co-living was like, hey, none of these people know how to do this better than I do. Let's just figure out and let's test and let's get better at the business. That's how we can came up to creating our own standard operating procedures that were unlike anything that other people were doing. Don't get me wrong. Some people had parts of everything. I stole it from here because I'm not original. I stole it from there because I'm unoriginal. And I stole it from there because I just asked enough questions. Tell me what stinks. What did you learn? How did you change? Tell me what works. I've been doing this for five years and plus. Those processes have evolved over time. As my business and what I learn changes, all of my systems and processes either get thrown out and replaced with something better, or I create new processes to answer for the new things that I need. I'll give you a perfect example of this. Pat Split started asking for and started posting. The reviews of the members moving inbound. If you look at the Rent by the Room, um, find a room page, there are not a lot of houses on there that have stars, right? Reviews, because it wasn't standard operating practice for hosts to ask for a move-in review. Because the one thing that I learned, the generation one hosts, they were not talking to the customers. The platform handled that because in the beginning, the platform handled that, right? Because they had to go convince these investors in 2018, 2019, hey, you want to put walls up and let random people live in your house? Well, you get six, seven, eight, nine, ten different streams of income. That was the business model. So forever, that generation of hosts were catered to by the platform. They did everything for them. You know, I talked to the guys who were the property managers for those things, and they had to create their own property management company as an affiliate because no property management company knew what the hell they were doing when it came to co-living. So they were defining things on the fly. What do they call it? You're you're you're fixing the airplane in the air. That's the nature of a startup, right? That's the business that we're in. So, that all being said, even playing field. If you are a principled thinker, if you can connect dots, if you can look for patterns that ultimately reverse-engineered success and brought it back to the very beginning, you can set your business up for all of these things. That was what co-living IQ, that was how my brain started. You can go visit our website, it's co-living IQ. It's right there, co-livingIQ.com. And it goes through these are my blueprints and templates that I've learned for the type of business that I want to run. These are just lifeline ideas. You can cater them and tweak them, and but you need them. You need the information on how do I do my listing? How do I set it up, understanding that there's an algorithm and a platform? Everybody shares the same rules, right? It's quote unquote like NASCAR. Everybody gets the same equal playing field, right? Why do some people always win and other teams always lose? Because some people know how to work the box. They know the rules of the sandbox, they know the rules of the platform, they understand the algorithm better, they understand human marketing. I spent a ton of time dissecting each one of these phases. The marketing of my product. So somebody clicks in it and books, the sales of my product, so that when they buy from me, expectation and reality gets very compressed. They get what they're expecting, if not more. And then customer service, how do I keep that customer happy so they stay? That's the business. That's every business: marketing, sales, customer service. Show me a business that doesn't understand that, and I'll show you a failed business that goes out of business. So those are kind of the intentions. If you are just a passive investor, you can be, but you better link up with the right operator because this entire business is operationally heavy and it's complex. But like I said before, once you see something, you can't unsee it. And you've seen this in your whole life. Like human nature, by it's human nature. There's only so many types of avatars and humans that are out there. You just have to know which ones you don't want to service because you don't, you're not capable of servicing that person. I am incapable of servicing a schizophrenic madman who doesn't care about other humans in the house and who's going to tell me he's not going to pay me and challenges me to kick him out of the house. I am not wired to be that guy. So I have to make sure I vet the quality and type of human being and type of customer that fits my business. I say it all the time. You choose your customer, you choose your future. In an operational sense, it boils down to how do you screen for your customers. I've learned if I allow other parties like a platform or somebody else to screen my customers, and I don't have standards, I don't have a leg to stand on and bitch about if they don't work out for me. But if I interview and I screen, and trust me, my screening questionnaire started out as 10 items and now it's 33. And now there's a phone questionnaire on the back side of it. An eviction is four months long in Atlanta and it'll cost you around $5,500. That's five months, right? And that doesn't even count in the lost revenue. If I can go ahead and wait 30 days, $800 for the right person to come in, didn't I just save money compared to what my potential losses are? So I am more restrictive, or I have higher qualifications to meet in order to live in my house. And one of the big things is it's not that you have to make a ton of money, but you have to accept what it is that you're coming into. So I want to know do you want to be a part of a community? Is that something beneficial for you, or are you going to shy away from it and be a hermit in the room? There's 10,000 other rooms in the city. I'm sure you can find a wonderful place to play to live for the same price. But in my house, the reason people stay, they like each other. Right? Like Christmas. What happens in other co-living houses? Well, in our house, they have a secret Santa. It cost me 75 bucks for a Christmas tree that I sent to the house through Amazon. I had a member in the house tell me during our house meeting in December. She's like, I have never had a Christmas tree before. It was awesome. It was awesome for her because these are the memories that she's making in our house with her new friends and support group that are there. Listen, I don't know if you do or do not talk to your customers. My one call to action for you is please communicate with your customers. These are the people paying down your mortgage. These are the people putting dollars in your pocket. Ask them what you're doing well. Ask them, you know, what you could improve on. Ask them what it would take for them to refer a friend. Ask them why they don't refer a friend. And fix those things because this is a business that's yours. The platform is just a vendor. They may go away someday. What are you going to do? So you have to understand what business you're building and what the partners that you're building with. Like I talked to a woman earlier. She has no idea how the property manager manages a property. She has no idea how many people get approved or rejected. She just looks at the numbers, goes, I'm at 50% occupancy and I'm losing money. Why are you losing money? Oh, that's a whole nother story. Because she bought it from a realtor who told her a bunch of mumbo jumbo that he didn't understand our business either. So she essentially needs seven out of eight bedrooms in her house just to break even. At four bedrooms, she's losing money every single month. She came to me looking like, hey, I just need to stop the hemorrhaging. If I can just not be paying out of pocket to own this property, I would be so grateful. We had to go in there and do root canals down to the core. The people that were in there, we had to get them out. And we had to reset the culture in the house, change her screening, change her listing, change the description, change the way she screened, change the pricing. Because when she was contacted the platform, she said, Hey, I'm not getting any bookings. And guess what they told her to do? You got it. You should reduce pricing and get rid of your move-in fee. Well, there's a reason why people do these things. So if you open the gates to everybody and you're running a business for everybody, the kind of thought is you're running a business for nobody. So if you don't know who you're trying to service, I beg of you, stop for a second, talk to your Chat GPT, do whatever you need to do, but brainstorm on what is my brand. What member experience, customer experience am I delivering? I watched an entire video. These guys were talking about Apple and how amazing it is. And they were talking about the slow opening of the box anticipation, the slow peel off the front of the screen. There's nothing on the back. It's the pure titanium or whatever they have, and it's smooth on all edges. Like they curated this experience for something that's a phone that gazillion, millions of people own, billions of people have, but they curated the experience. These are lessons that all these other successful businesses we can incorporate them into our co-living business and hopefully get over this negative stigma that's out there about like, hey, renting a room is like a boarding house. No, it's not. If you think about what the macroeconomic state is in our country, we are moving toward a renter's economy. Like I think about it for myself as a business owner and as an adult. I'm terrified about AI. I love, trust me, I use AI Claude, I use chat, I use everything. I can build websites now, you know, with vibe coding, I can change an analysis for like 30-page documents and spreadsheets and reorganize. I do all of that to enhance my business. But when I look at it as if you don't own something, as a new real estate investor, if you don't own something where you take advantage of the tax code that's there and you get to pass along generational wealth to the next group and you get to build an entire portfolio based on leverage at 75 cents on the dollar, think about it. You could buy $100,000 worth of real estate for $25,000. That's just the math, right? Like, and it if you do it correctly, you can take advantage of the skills you learn that we teach around how do you acquire a property, like my second property that I had, or it's actually my fourth property, my second one on Pad Split, $217,000 acquisition. Trust me, it was listed for $275. I waited and waited, and it didn't meet my numbers. So I learned a massive skill as an investor called FOMO. I learned how to fight my own emotions that fear of missing out or fear of a better offer. No, because in real estate, you make all your money on the buy. If you don't acquire the property correctly, you will never make money in the operating business because your overhead is too much on the mortgage and insurance and the taxes. You have to buy it correctly. That is a skill. It's a learned skill on how to identify where, how to identify what, and how to identify with the idea of, hey, future operating business, you're the one that's going to make me money. Acquisition costs me money. You should tell your acquisition arm how and what you're buying. So you buy correctly. You renovate correctly. Because if you renovated with the cheapest way in mind, you're just kicking the can down the street. You are. And it's just kicking the can down time. Oh, this air conditioner is working. But it's two and a half tons for a 10-bedroom house. Do you think it's really going to be good enough? If this was your third, fourth, or fifth property, you would know you better bake that in to the renovation costs and spread that cost over 30 years amortized. You should, because you're going to have to replace it anyway. And there's some cases where you may want to keep that air conditioner unit for the rest of its usable life, but you better put it in another unit to support the operating business of the customers who are going to pay you money. You should listen to the operator inside of you so that you can build and convert to the property for the business that's needed. Think about this, right? There's so many analogies in this. When we had kids, we had two kids, we no longer had a two-door sedan. We had to go into the minivan world. And then my wife's like, I don't do minivan. So we ended up getting into the SUV world. You don't buy a two-door sparks car if you've got three kids at home. It just doesn't make any sense, right? That's what we're doing. You can't convert a property without really understanding the business that you're running. And I just had a conversation with a student in Tampa. He lives in Maryland. He's got a house in Tampa. It was his parents' house. So he was an accidental landlord. He had a note on it. He's like, I better figure out a way to make more money. So he's like, oh, I'll do co-living because he bought into the idea that six, seven, eight bedroom houses, you know, on the spreadsheet, 800 times in his case, 11, is 8,800 bucks. He'll make so much money he won't know what to do with himself. We had a long conversation today around do you really want 11 bedrooms just because the general contractor told you you could possibly fit in eight bedrooms? Listen, I can't tell you how many people are operating at 50 to 60% occupancy today because the assumption that this platform is going to fill your house to 100% is freaking asinine. The numbers just don't support it. I have 100% occupancy, but I work my ass off to build systems where people stay. I tell people it's like a colander that you're washing fruit in. If water is leaking out the bottom, as you continue to put water in the top, you don't make money. You need to have that thing hold everybody that's in the house while you continue to add new revenue to the top. That's how you make money in co-living. If you're running a termstyle because people don't like it, you never make money because you're paying 10 days for the new person coming in and leaving 30 days. Did you make any money? No. Because the first $300 goes to Pad Split. What happens for the other two weeks of the that they're there? You don't make money if people stay a really short period of time. That's just not the business model we run. Maybe somewhere else. If if you're doing it by yourself on Facebook Marketplace, if you're doing it somewhere else on a different platform, that's not how you make money in co-living using a platform like PadSplit if you have high turnover. And they'll tell you a lot of the high turnover comes from the fact that the operator, you are not providing an experience worth staying. Keep that in mind. Okay. So these are the mistakes that I made. And I'm just going to summarize it here. Buying correctly, you got to make sure that you're underwriting the deal at a reasonable number. And I now have created a calculator. You can find it on my website. Um, and you can download it. Why are you listening to somebody who's a realtor trying to sell you a house? Remember, that's their business and they want their 3%. Why are you listening to them when they tell you, oh, this house, it's got a $300,000 sales price? Look, it's on discount because uh the appraisal was $330,000. You could fit six bedrooms in there. Okay, how many bedrooms will it take you to get to break even? In the majority of those cases, it's like five out of six. And if I told you that the rest of the country is between 50 and 60, 65% occupancy, and out of that 65% occupancy, there's some people that are probably not paying on time. So your occupancy can be high at 80%, but your collections may be down at 60%. And that person may catch up, they may want to stay, and their income and their payment will look like a you know a simple harmonic wave, but you have to understand the business that you're getting into. And that's why I'm such a big proponent of learn, learn more so that you can earn more. Okay, so just keep that in mind. So the lessons are you have to acquire. And the beauty of the acquisition skill that I'll call it, once you know the operations and your business and your houses are running smoothly. Like I give you an example. I might post it on here for a video. I went from $4,800 to $8,000 to $6,600. This is collections. So one house I had um $4,800, and then it bumped up to $8,600 because all the late fees that people were behind, they caught up all at the same month. Then it plateaued out. I brought in a new house, $6,600 the next month, $6,800 the next month. And then I popped and I went to $11,000 because all the booking fees for the nine bedrooms, so the seven people that are there, I had to pay those all at the same two months. And I didn't collect any of that revenue. And now all of a sudden I had 100% filled in house one, and I had seven out of nine in house two, and all the booking fees were done, and I had, you know, half of those members are referrals in there. So now on average, I'm between $10,000 and $12,000 total gross between two properties. I'm competing in terms of revenue collected with some of the best Airbnb investors that are out there. Do I stress about having 16 rooms? No. Because I have other properties that are doing different things. But in these co-living properties on Pad Split, the systems that I run allow me to be very consistent in how I operate my business. So I get to do what I love to do most, which is analyze deals. I love negotiating for a good deal. If it pencils, I love taking it down. If it doesn't pencil, I love the fact that I have enough discipline to say, no, thank you. I can wait. Because it's my money. You're the one trying to sell. You have the problem, not me. I'm not in a hurry to buy. So the acquisition is a skill set, how to underwrite it correctly and where I should buy. Okay, that's nuance. You don't learn that just by looking at reports and data. You have to figure out kind of what the gray areas mean. Do I have good parking? Is it septic? Is it a neighborhood that's gentrifying too fast? Is it all single, you know, new owners? Are they gonna call code enforcement when they see me trying to put in a window in a garage? These things are all real stories. So acquisition is a big thing. The conversion is where you're gonna get kicked in the teeth during your first property. The GC is gonna tell you something you don't know any better. So you go with them. Yes, I trust you. And then they are gonna do it the way they want to, or the way they've done it in the past. That means that the previous people, if I could tell you a suggestion, is don't just talk to the GC and ask him how many deals he's done. Ask him to see some of the properties he's done. Ask him to talk to the owners of the properties that he's done. Go deeper in terms of how you're researching the vendors that you're using. You're gonna pay this guy 50, 60, 80, $100,000, and you're gonna trust him on that one? Crazy. All right. And then when you go live, it's not, oh my God, I arrived at the finish line. I'm gonna go sit back and chill. Do you have any idea of the business that you want to run? Do you have any idea of the brand that you want to deliver, the customer experience that you want to deliver? The very first phone call you have with a new tenant coming in, how are you gonna describe the experience that they're gonna have at the house? Welcome to your room. Some people just don't even talk to customers. We know that. So the bar for you to be exceptional isn't high, right? But the opportunity for you to set yourself apart is in a new niche like co-living and shared housing. Everybody's trying to figure it out. If you have some guidelines and some conviction that you want to provide a better product, take a look at the business landscape. I live in Georgia. We've got a lot of different grocery stores. Why do people go to Publix? Because it's better than Kroger. It's better than Ingalls, it's better than Win Dixie, right? They know what to expect. It's very consistent when you get there. I know that I'm paying a premium when I go in there. And then sometimes I'll go to Costco and sometimes I'll go somewhere else for some things. But my baseline is that I like what I get because I know what to expect and they meet my expectations, even if it comes with a higher price tag. That's called value. That's the best way that you should kind of think about your brand. How do I provide value for the price that these customers are paying you? How do I give you enough value that they want to be staying in your rooms and not somebody else's? Welcome to the co-living revolution. It is such a huge opportunity out there for people to create massive generational wealth, especially in this economy when it is really hard to buy real estate because it doesn't cash flow. Our model cash flows, but you have to buy it right. I know plenty of people with co-living houses that aren't cash flowing positively because they purchased it wrong and they operate it poorly. Listen, any great business, like I have friends that have, they're franchise owners. They're like, dude, McDonald's sometimes close because the operator sucks. You know, so you can have all the tools given to you. But if you're not a good operator, you're gonna fail. So I'll end with this run your business with this idea. We all came to this business because we believe that affordable housing is a problem. And we are capitalists and we believe we can provide a solution that is a win-win. And that's really rare in the business world. But I love that about what we do. No margin, no mission. Think about that. You have to make money in this business so that you can go ahead and go purchase another property and solve more affordable housing problems and give your customers an opportunity and a leg up to improve their life. We don't want, we, I'll tell you about me, I don't want my customers to stay forever. I love the ones that are consistent and do, right? But I love the ones who graduate out into another phase of their life. All right. I hope to see you guys. I have a free webinar. It's Thursdays, every Thursday. Go to the website, you can register for that. It's free. Well, it's gonna cost you. It's gonna cost you some time. And I guarantee you that hour that you listen to me is way better than the hour that you're doom scrolling on Instagram. Trust me, because I know. All right, I'll see you guys soon. Best of luck.